23 July SURVIVING DISRUPTIONS IN BUSINESS CALLS FOR MORE AGILE BOARDS AND A ROBUST GOVERNANCE FRAMEWORK (2020-07-23) July 23, 2020 Corporate Governance Framework®, General, Governance Framework governance framework, disruptions, Corporate Governance Framework® By Terrance M. Booysen and peer reviewed by Jené Palmer CA(SA) (CGF Lead Independent Consultant) Even prior to the Covid-19 pandemic, the ease of doing business in South Africa was already under great pressure. According to the World Bank’s annual ratings, South Africa’s ranking had deteriorated from 82nd position amongst 190 economies to 84th position in 2019. The Covid-19 saga has clearly made matters far worse for businesses to survive in South Africa, hence requiring greater board agility to weather and beat the socio-economic tsunami we are now facing. Considering the impact Covid-19 has had upon most businesses, boards of directors have again been reminded of the critical importance of having an appropriate and responsive back-up plan in order to sustain the massive business disruptions caused by unexpected risks. Unsurprisingly, a number of organisations have been caught short and this begs the question regarding the board’s full understanding of its own business resilience in such turbulent times. According to a recent series of surveys conducted by Stats SA (April 2020), nine out of ten (90%) businesses surveyed (2,182 businesses) reported reduced turnover; thirty-six percent (36%) indicated they were retrenching employees in the short term as a measure to cope with Covid-19 and twenty-five percent (25%) indicated they were decreasing their working hours. Approximately one out of ten businesses (10%) indicated that they had ceased business permanently and the industries with the highest percentage of organisations permanently closing their doors include construction (14%); community, social and personal services (12%); and agriculture, hunting, forestry and fishing (12%). Thirty percent (30%) indicated they could survive less than a month without any turnover, whilst 55% of the surveyed organisations indicated that they could survive between 1 and 3 months. Only seven percent (7%) indicated that they could survive for a period longer than three (3) months. With the hindsight of a number of recent wide-scale business disruptions caused by either natural or human activated disasters such as 9-11, and given the experiences gained from these past events, most medium and large sized businesses should have been able to not only foresee a risk such as Covid-19, but they should also have been able to rapidly absorb the shock and bounce back in a very short space of time. The reality is that most South African organisations have not been able to resume a ‘business as usual’ approach and this has been further complicated by massive government intervention which may indeed be doing more harm than good. By closing down the sale of various non-essential products or services, or restricting trade in one way or another, it fundamentally unsettles the business supply chain and creates other unintended problems that could cause terrible long-term social and economic damage. In addition to these matters, since Covid-19 does not appear to be going away anytime soon, organisations are realising that their business operating environment will rapidly need to become ‘contactless’. In this regard, the challenges of dealing with Covid-19 go well beyond the wearing of face-masks and the routine of measuring people’s temperatures. Covid-19 regulations are forcing organisations, amongst other entities, to accommodate increased virtual interactions with their employees, customers and suppliers. This entails re-modelling previously physical ‘touch’ and ‘space’ zones to provide for spatial distancing between people, as well as the tracking and monitoring of their daily movements in certain circumstances. Expectedly, this has great bearing upon the entire organisation and the outcomes (impact) will be evident in the organisation’s governance framework. Considering these ‘new’ business challenges, one may question just how knowledgeable and prepared boards are to deal with the Covid-19 impacts that affect many of their strategic and operational activities. Do boards have the ingenuity and means to understand the primary and secondary risk implications, not least also the impact Covid-19 will have upon the organisation’s resilience? A robust governance framework will facilitate a common understanding amongst board members of the governance, risk and compliance (GRC) challenges facing the organisation and will highlight those business areas which require immediate and/or critical attention. Rudimentary governance instruments implemented to act as a substitute for a governance framework will not be useful in assisting the board to prioritise the allocation of scarce resources to achieve their strategic objectives and ultimately ensure organisational sustainability. It’s true, these are most uncertain and unprecedented times we now live in, and more than ever before, boards will increasingly be required to truly understand their businesses and operations if they are to prove their strategic worth. The implementation of a Corporate Governance Framework® will enhance the speed and quality of decision-making by boards by ensuring a more holistic understanding of the interdependencies within the business, including a proper perspective of the organisation’s GRC challenges. Covid-19 has certainly changed the rules of business and boards will need to ensure that their organisations can adapt accordingly. ENDS Words: 899 For further information contact: CGF Research Institute (Pty) Ltd Terrance M. Booysen (CEO) Tel: +27 (0)11 476 8264 / Cell: +27 (0)82 373 2249 E-mail: firstname.lastname@example.org Web: www.cgfresearch.co.za CGF Research Institute (Pty) Ltd Jené Palmer (Lead Independent Consultant)) Tel: +27 (0)11 476 8264 | Cell: +27 (0)82 903 6757 E-mail: email@example.com Web: www.cgfresearch.co.za Follow CGF on Twitter: @CGFResearch Click below to read more... Attached Files 20200723-Surviving-disruptions-in-business-calls-for-more-agile-boards-and-robust-governance-framework.pdf 193.96 KB Related Articles TANGIBLE BENEFITS OF A CORPORATE GOVERNANCE FRAMEWORK® Article by Jene’ Palmer Forward-thinking organisations have realised that corporate governance does not merely fall into the portfolio of the Company Secretary. Indeed, the draft King IV Report on Corporate Governance for South Africa 2016 (‘King IV’), describes corporate governance as “the exercise of ethical and effective leadership by the governing body” of an organisation. Why then is corporate governance still viewed by many organisations as a process which increases bureaucracy and drives a ‘tick box’ exercise? Perhaps the explanation lies in not understanding and appreciating the value which can be unlocked by implementing a purpose-built Corporate Governance Framework® which is tailored to the organisation. Empirical research supports the fact that good corporate governance translates into tangible and sustainable benefits for the organisation. Some of these benefits are set out below. COVID-19: ADDRESSING DEBILITATING RISKS REQUIRES A ROBUST GOVERNANCE FRAMEWORK (2020-04-17) The times we are currently living in are unprecedented. Covid-19 has once again highlighted the reasons why governance -- good governance -- is a critical function in a democratic country. BOARDS THAT CREATE VALUE: CORPORATE GOVERNANCE FRAMEWORK® By Jene’ Palmer and reviewed by Terrance M. Booysen It has been painful to watch the likes of Lance Armstrong, Mike Tyson and Hansie Cronje sabotage their futures through poor decision-making. Similarly, many organisations and their boards have failed to demonstrate strong and responsible leadership qualities to motivate and drive their organisations to success. Awareness, decisiveness and accountability are some of the business leadership qualities required to achieve remarkable performances. The ‘buck’ stops with the board of directors and it is the board of directors who are ultimately held accountable for the success of the organisation. However, with the business landscape changing at an accelerating rate, risk management and decisive decision-making are becoming more challenging and business failures more prominent. A recent Harvard Business Review reports the failure rate for mergers and acquisitions to be between 70% and 90%. According to the United States Small Business Administration, only 44% of new businesses are still in existence after four years. Against this backdrop, how does a board create a sustainable organisation in what are clearly turbulent times? SUSTAINABILITY DEPENDS ON A STRONG GOVERNANCE FRAMEWORK Article by Terrance M. Booysen Corporate governance is one of the key elements many investors consider when they reflect upon the organisation’s success, as well as when deciding upon their investment choices. But when the organisation’s governance system shows signs of stress or failure, not only do astute investors understand the unsettling impact it has upon the organsation’s supply chain, they also become wary about its sustainability which may give rise to them re-considering to ‘weather the storm’ or ‘bail out’ so to speak. Over the years so much has been written about failures of corporate governance within organisations, including the financial, social and political consequences which are typically found in its trail. Yet in spite of numerous regulation to improve the overall conduct of organisations, including the various King Codes of Corporate Governance written in South Africa, even more organisations are becoming affected by poor governance. DO YOU REALLY NEED A CORPORATE GOVERNANCE FRAMEWORK®? By Jene’ Palmer and reviewed by Terrance M. Booysen We know that both local and international organisations are continuously having to adapt to operate in uncertain business environments. Locally, the release of the Preferential Procurement Regulations 2017, which places stronger emphasis on ‘radical transformation’, against the backdrop of persisting low economic growth rates are only some of the elements giving rise to further uncertainty. Internationally, the business and regulatory implications of the election of President Donald Trump and the vote in favour of Brexit and how these events will impact on local markets and businesses, is still unfolding. It therefore comes as no surprise that recent governance, risk and compliance (‘GRC’) surveys all indicate an increasing need to improve risk oversight and to balance opportunity management with risk management. The challenge lies in being able to achieve these objectives! BOARDS THAT PLAY THE INFINITE GAME (2019-05-27) Visionary leaders do not underestimate the power of the Corporate Governance Framework® in driving organisational culture. These leaders appreciate the importance of a governance framework in nurturing sustainability by driving values-based decision-making to “play the long game”. Comments are closed.